Two investment banks have threatened legal action against a Canadian potash miner for allegedly not paying advisory fees, in an unusual move sparked by a deal that was once hailed as a potential harbinger of Chinese investment into the cash-hungry junior potash industry.

Lawyers for Swiss banking giant UBS AG and Montreal-based Lockwood Financial Ltd. separately sent letters to Western Potash alleging nonpayment of fees on the June 2013 deal. China BlueChemical Ltd. and a Chinese partner took a 19.9% stake in the...